June 18, 2002
Mr. Edward E. Babcock, Jr.
Adelphia Business Solutions, Inc.
One North Main Street
Condesport, Pennsylvania 16915
Re: Proposed Secured Debtor in Possession Priming Credit Facility
Dear Mr. Babcock:
Based on our recent discussions, we are pleased to express the interest of Beal
Capital Markets, Inc. (the "Lender"), a wholly owned subsidiary of Beal Bank,
S.S.B., in underwriting a new Secured Debtor in Possession Priming Credit
Facility of approximately $15 million (the "Proposed Facility") for Adelphia
Business Solutions, Inc. ("ABIZ"), and the other "Borrowers" specified in the
Summary of Terms and Conditions attached as Exhibit A hereto (the "Proposal
Outline"), to be used for the purposes described in the Proposal Outline. This
letter and the attached Proposal Outline replace our earlier proposal letter
(and accompanying outline), dated June 10th, which expired unaccepted in
accordance with its terms.
You have advised us that those of the Borrowers who are not Debtors and Debtors
in Possession in the proceedings under Chapter 11 of the Bankruptcy Code
currently pending in the Bankruptcy Court for the Southern District of New York
(the "Bankruptcy Court") will, prior to the entry of the "Final Order" described
in the Proposal Outline, file petitions with the Bankruptcy Court for orders for
relief under Chapter 11 of the Bankruptcy Code and seek joint administration of
their cases. The Proposal Outline has been drafted anticipating such filings.
The Proposal Outline also has been drafted based upon our understanding that the
Borrowers will not be seeking any interim order of the Bankruptcy Court
approving the Proposed Facility. If this understanding is inaccurate, kindly so
advise us so we may revise the Proposal Outline accordingly. This proposal
letter is issued anticipating that the "Final Order" would be entered and become
final by August 15, 2002.
In response to your request, the Lender is pleased to submit the Proposal
Outline. The Proposal Outline is not intended to be inclusive of all of the
terms and conditions which the Lender may determine to be necessary or
appropriate in connection with the Proposed Facility or any other credit
facility. At the present time, the Lender is unable to predict whether credit
approval for the Proposed Facility, or any other credit facility, ultimately
will be recommended or obtained by the Lender and, if so recommended and
obtained, what additional or alternate terms and conditions such credit approval
may be conditioned upon.
Nevertheless, the Lender is willing to continue its due diligence and related
efforts necessary for the Lender to determine whether to underwrite the Proposed
Facility, which due diligence may include, without limitation, field
examinations and appraisals, as well as verification of the ownership by the
Borrowers and the Guarantors (as defined in the Proposal Outline) of their
assets as described to the Lender. Whether or not credit approval for the
Proposed Facility ultimately is recommended or obtained and, if obtained,
whether or not the Proposed Facility ultimately is consummated, the Borrowers
and Guarantors shall jointly and severally agree to pay all reasonable
out-of-pocket fees and expenses incurred by the Lender in connection with such
due diligence and the negotiation of the Proposed Facility, together with all of
the costs and expenses of the Lender (including but not limited to the fees and
expenses of the Lender's counsel and financial and other advisors) including,
but not limited to, such fees and expenses incurred to date.
The rights of the Lender hereunder shall be fully assignable to Beal Bank,
S.S.B. or to any wholly owned affiliate of Beal Bank, S.S.B. Upon any such
assignment by the Lender, all references to the Lender and to DIP Lender in the
Proposal Outline shall automatically be to such assignee.
As part of the acceptance of this proposal letter, there shall be delivered to
the Lender a deposit of $250,000 (the "Initial Deposit"), of which $50,000 was
received by us on Wednesday, June 12th. As we have discussed, the source of the
Initial Deposit (including the amount already paid) and the arrangements under
which it is paid to us shall be subject to our approval. Based upon our
understanding to date, payment of the Initial Deposit by Adelphia Business
Solutions of Pennsylvania, Inc. ("ABIZ-PA") would be acceptable, and this
proposal letter is issued anticipating that ABIZ-PA is the source of the Initial
Deposit. It is not possible to predict whether the Initial Deposit will be
sufficient to cover all of our expenses. Accordingly, although we will keep ABIZ
apprised periodically on the amount of our expenses, by acceptance of this
proposal letter the Borrowers and Guarantors shall be deemed to have agreed to
deliver to the Lender from time to time such additional deposits as may be
necessary to cover expenses in excess of the Initial Deposit (together with the
Initial Deposit, the "Deposit"). The Borrowers and Guarantors shall agree to
obtain such approvals as the Lender determines to be necessary or appropriate
with respect to, inter alia, the payment of the Deposit and all terms relating
thereto.
In the event the Proposed Facility is consummated, then the Deposit, less all
reimbursable expenses, will be applied to closing fees and expenses. In the
event the Proposed Facility is not consummated due to the Lender's decision not
to approve the Proposed Facility, then the Deposit, less all reimbursable
expenses, will be returned to the applicable payer(s). If, on the other hand,
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the Lender decides to approve the Proposed Facility and the Proposed Facility is
not consummated for any reason whatsoever, then the Lender will be entitled to
retain all unused portions of the Deposit.
In connection with the Proposed Facility, the Borrowers shall agree to provide
to the Lender, in a reasonably prompt manner, and in any event at or before such
time as the Lender may deem necessary for a complete and satisfactory review by
the Lender, all such documents, reports, agreements, financial and other
information, environmental reports and other items as the Lender or its counsel
may reasonably request with respect to the Borrowers and the Guarantors and
their businesses.
The terms of this proposal letter and the Proposal Outline shall be governed by
the laws of the State of New York and may be modified only pursuant to a writing
signed by the Lender. The terms of this proposal letter and the Proposal Outline
are confidential and, except for disclosure on a confidential basis to
accountants, attorneys and other professional advisors retained by the Borrowers
and Guarantors in connection with the Proposed Facility or as may be required by
law, may not be disclosed in whole or in part to any other person or entity
without the prior written consent of the Lender.
All of the Borrowers' and the Guarantors' reimbursement, indemnification and
confidentiality obligations set forth in this proposal letter shall survive the
termination of this proposal letter and shall remain in full force and effect
regardless of whether the Lender obtains necessary internal approvals and agrees
to underwrite all or any portion of the Proposed Facility.
In the event the Borrowers and Guarantors breach any of their obligations or
agreements set forth in this proposal letter, at the Lender's option this
proposal letter shall terminate and any unused portion of the Deposit and any
fees paid to the Lender prior to such termination would be forfeited.
This proposal letter is not a commitment of any kind on the Lender's part and is
not to be construed or relied on by the Borrowers or anyone else as a
commitment. As indicated earlier, establishment of the Proposed Facility and any
lending commitment thereunder on the part of the Lender would be subject to the
completion of a field examination and other due diligence, as well as the
internal credit approval of the Proposed Facility by the Lender (which, to date,
has neither been recommended nor obtained), completion and execution of
appropriate loan documentation in form and substance satisfactory to the Lender
in its sole discretion, and satisfaction of the closing and funding conditions
to be contained therein.
If the foregoing represents your understanding and agreement, the following
items are needed for acceptance: (i) the countersignature of ABIZ and ABIZ-PA to
this proposal letter; and (ii) payment of the balance of the Initial Deposit.
These items would need to be received by the Lender no later than 5:00 p.m., New
York time, on Wednesday, June 19, 2002, after which time this proposal letter
shall expire unless previously accepted.
Although the Lender will not require, as a condition to acceptance of this
proposal letter, an acknowledgement and agreement by Adelphia Communications
Corporation ("ACC") to this proposal letter and the Proposal Outline, both the
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Proposal Outline and the definitive loan documentation will continue to require
written subordinations and other items from ACC as a condition precedent to the
closing of the Proposed Facility.
In the event that the Proposed Facility receives internal approval by the Lender
and the Proposed Facility is consummated and the Borrowers propose a plan of
reorganization acceptable to the Lender, the Lender would be willing to consider
providing exit financing on terms and conditions satisfactory to the Lender.
We look forward to working with you in the weeks ahead.
Very truly yours,
BEAL CAPITAL MARKETS, INC.
By:
Title:
ACKNOWLEDGED, AGREED & ACCEPTED:
ADELPHIA BUSINESS SOLUTIONS, INC.
By:
Title:
The undersigned does hereby acknowledge & agree to the foregoing, and does
hereby confirm that it is the payer of the Initial Deposit (including the
$50,000 preliminary payment).
ADELPHIA BUSINESS SOLUTIONS OF PENNSYLVANIA, INC.
By:
Title:
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EXHIBIT A
PROPOSAL OUTLINE
SECURED DEBTOR IN POSSESSION
PRIMING CREDIT FACILITY
SUMMARY OF TERMS AND CONDITIONS
This Proposal Outline of Summary of Terms and Conditions (this "Proposal
Outline") outlines certain salient terms of the proposed debtor in possession
financing. Reference should be made to the proposal letter to which this
Proposal Outline is attached (the "Proposal Letter") for the circumstances under
which this Proposal Outline is issued. This Proposal Outline and the Proposal
Letter do not constitute, individually or collectively, any lending commitment
on the part of Beal Capital Markets, Inc., or Beal Bank, S.S.B., or of any of
their affiliates.
Borrowers: Adelphia Business Solutions, Inc. ("ABIZ"), and each
direct or indirect subsidiary of ABIZ (with certain
specific exceptions detailed below) (such subsidiary
borrowers, together with ABIZ, the "Borrowers"), as
debtors and debtors in possession under title 11 of the
United States Code (the "Bankruptcy Code") in cases
that currently are pending or that shall be pending
(the "Cases") at the time of the entry of the Final
Order (as defined herein) in the Bankruptcy Court for
the Southern District of New York (the "Bankruptcy
Court") and as to which Cases an order of joint
administration shall have been entered as to all of the
Borrowers. Each of the Borrowers shall be jointly and
severally liable to repay all indebtedness under the
DIP Loan Agreement (as defined herein). The direct and
indirect subsidiaries of ABIZ that shall be excluded as
Borrowers shall be Adelphia Business Solutions of
Pennsylvania, Inc., a Pennsylvania corporation
("ABIZ-PA"), PECO Hyperion Telecommunications, a
Pennsylvania general partnership ("PHT"), Susquehanna
Adelphia Business Solutions, a Pennsylvania general
partnership ("SABS"), and Adelphia Business Solutions
Capital, Inc., a Delaware corporation ("ABIZ-Capital").
Exclusion is premised on their ownership, assets and
businesses not varying in any materially adverse manner
from those heretofore described to DIP Lender (as
defined herein).
Guarantors: ABIZ-PA and ABIZ-Capital (the "Guarantors") shall
jointly and severally guarantee all indebtedness under
the DIP Loan Agreement. (PHT and SABS shall be
excluded as guarantors. Exclusion is premised on their
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ownership, assets and businesses not varying in any
materially adverse manner from those heretofore
described to DIP Lender.)
DIP Lender: Beal Capital Markets, Inc., or Beal Bank, S.S.B. or any
wholly owned affiliate of Beal Bank, S.S.B., as
assignee of Beal Capital Markets, Inc. (the "DIP
Lender").
Credit Facility: The loan to be made under the DIP Loan Agreement
(the "DIP Loan") would consist of a single-draw term
loan credit facility (the "Facility") in an aggregate
principal amount of $15,000,000. The ultimate amount of
the Facility shall be subject to (among other things)
the DIP Lender's determination of the appraised value
of the DIP Collateral (as defined herein).
Drawdown: The DIP Loan shall be advanced in one drawdown, on the
Closing Date. Such drawdown shall be subject to the
conditions set forth herein or to be set forth in the
definitive loan documentation. No portion of the
Facility shall be available for drawdown after the
Closing Date.
Use of Proceeds: The proceeds of the DIP Loan shall be used by the
Borrowers and the Guarantors in accordance with the
terms of the postpetition financing agreement
described herein (the "DIP Loan Agreement") (i) to
fund post-Closing Date operating expenses of the
Borrowers and Guarantors in accordance with, but
limited to, the Cash Budget (as defined herein), (ii)
to fund certain post-petition but pre-Closing Date
fees accrued under the management services agreement
(the "ABIZ/ACC Management Services Agreement") between
ABIZ and Adelphia Communications Corporation ("ACC"),
to the extent included in the Cash Budget, and (iii)
to pay all fees and expenses as provided under the DIP
Loan Agreement.
Cash Budget and
Business Plan: Sufficiently in advance of the Closing Date, the
Borrowers shall have provided to the DIP Lender: (a) a
cash operating budget for the period from July 1, 2002
through June 30, 2003 (the "DIP Budget Period") in form
and substance satisfactory to the DIP Lender in its
sole discretion (the "Cash Budget"), reflecting, on a
line-item basis, anticipated cash receipts and
expenditures of the Borrowers and Guarantors on a
month-by-month basis for the DIP Budget Period; (b) a
business plan reflecting, on a month-by-month basis,
anticipated profits and losses and financial condition
of the Borrowers and the Guarantors for the DIP Budget
Period, in form and substance satisfactory to the DIP
Lender in its sole discretion (the "Business Plan");
and (c) such other financial information as the DIP
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Lender may require to monitor compliance with the Free
Cash Flow Variance (as defined herein).
Each month during the term of the DIP Loan Agreement,
the Borrowers shall provide to the DIP Lender a copy of
a variance report (the "Variance Reports") reflecting
variances from the Cash Budget and the Business Plan,
including any Free Cash Flow Variance, for such month
and for any period-to-date that the DIP Lender may
require, and including a written explanation of such
variances, due as follows: (a) within 5 days after the
end of each calendar month, in the case of a Variance
Report pertaining to the Cash Budget; and (b) within 30
days after the end of each calendar month, in the case
of a Variance Report pertaining to the Business Plan
and any Free Cash Flow Variance.
Term: The DIP Loan shall be repaid in full at the earliest to
occur of (i) one year after the Closing Date, but not
later than June 30, 2003 (the "Maturity Date"), (ii)
the Termination Date (as defined herein) and (iii) the
effective date of a plan of reorganization or
liquidation for any of the Borrowers. The DIP Loan also
is subject to earlier mandatory repayments as detailed
below, but there is no scheduled amortization prior to
the Maturity Date.
Closing Date: The date upon which all conditions precedent to the
making of the initial extension of credit are satisfied
(the "Closing Date").
Interest Rates and
Payment Dates: The non-default rate of interest with respect to the
DIP Loan shall be the Prime Rate plus 4% per annum, but
in no event less than 12% per annum (the "Non-Default
Rate"). The "Prime Rate" will be the highest of the
Prime Rates published in the Money Rates section of the
Wall Street Journal as the base rate on corporate
loans. In the event the Prime Rate as published in the
Wall Street Journal ceases to exist or the Wall Street
Journal ceases publishing a Prime Rate, the DIP Lender
will substitute a comparable index which is outside the
control of the DIP Lender. In the event of an error by
the Wall Street Journal, the "Prime Rate" will be based
upon the Prime Rate as corrected.
The default rate of interest with respect to the DIP
Loan (applicable after the occurrence of an Event of
Default) shall be the Non-Default Rate plus 4% per
annum.
Interest shall be payable in cash, monthly in arrears.
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Closing Date
Financing Fee: A closing fee (the "Closing Fee") equal to 6% of the
aggregate facility (i.e., $900,000), fully earned as of
the Closing Date, shall be paid on the Closing Date to
the DIP Lender.
Monthly Administration
Fee: A monthly administration fee of $15,000 shall be paid
to the DIP Lender on the Closing Date and the first day
of each month thereafter so long as any portion of the
DIP Loan is outstanding.
Nature of Fees: Non-refundable under all circumstances.
Voluntary Prepayments: Permitted at any time, upon 5 business days'
prior written notice and in reasonable increments to be
established in the DIP Loan Agreement, without
prepayment penalty.
Mandatory Repayments: (a) Mandatory repayment of the DIP Loan under the
Facility shall be required in an amount equal
to 100% of insurance and condemnation proceeds arising
from, derived or related to the DIP Collateral (as
defined herein), in each case received by any of the
Borrowers or the Guarantors.
(b) Asset Sales:
(i) General Rule: Except for Paydown Permitted
Asset Sales and Non-Paydown Permitted Asset
Sales, any sale of assets shall be subject to
the approval of the DIP Lender, not to be
unreasonably withheld or delayed. As a
condition to such approval, the DIP Lender
may require that the net sale proceeds
thereof shall be applied to repayment of the
DIP Loan.
(ii) "Paydown Permitted Asset Sales": Sale of
equipment and inventory (each as defined
below) of the Borrowers shall be permitted
with notice to but without prior approval of
the DIP Lender, subject to the following: (A)
all such sales shall be for fair value, in
bona fide arm's-length transactions with
third party purchasers (any ABIZ entity or
ACC entity or member of the Rigas family, or
any of their respective affiliates, shall not
be eligible purchasers); (B) the gross
purchase price for any item must not exceed
$500,000, and must be payable entirely in
cash at closing; (C) the net purchase price
for any item must equal at least 25% of the
net book value of such item; (D) such sale
otherwise must be permitted without further
order of the Bankruptcy Court, in accordance
with the Omnibus Sale Order; and (E) all net
proceeds of any such sale shall be applied to
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repayment of the DIP Loan. The DIP Lender
would retain the right to object to any such
sale, in accordance with the Omnibus Sale
Order. The "Omnibus Sale Order" would be
defined by reference to the final order
substantially in the form of the draft
thereof received by the DIP Lender on June
17, 2002 (or any later modification as to
which the DIP Lender had approved).
(iii) "Non-Paydown Permitted Asset Sales": Sale of
equipment and inventory (each as defined
below) of the Borrowers pertaining to
specified noncontinuing markets shall be
permitted with notice to but without prior
approval of the DIP Lender and without
requiring that the net sale proceeds be
applied to the repayment of the DIP Loan,
subject to the following: (A) all such sales
shall be for fair value, in bona fide
arm's-length transactions with third party
purchasers (any ABIZ entity or ACC entity or
member of the Rigas family, or any of their
respective affiliates, shall not be eligible
purchasers); (B) the gross purchase price for
any item must not exceed $50,000, and must be
payable entirely in cash at closing; (C) the
aggregate gross purchase price of all such
sales in any calendar month must not exceed
$400,000; and (D) all net proceeds shall be
retained by the Borrowers and applied to the
expenses detailed in the Cash Budget.
Non-Paydown Permitted Asset Sales would be
limited to equipment and inventory that at
all times since the ABIZ petition date have
been located in such specified noncontinuing
markets, except that sales also would be
permitted as to any such equipment and
inventory that has since been relocated to
centralized warehouses.
(iv) For purposes of delineating permitted asset
sales, "equipment" and "inventory" would be
defined by reference to the New York Uniform
Commercial Code ("NYUCC") and, for
clarification purposes, would specifically
include desks, chairs, lamps, file cabinets,
computer equipment and telecommunications
equipment. However, "fixtures" (as defined in
the NYUCC) would be excluded.
(v) If any asset sale would satisfy the criteria
both for Paydown Permitted Asset Sales and
Non-Paydown Permitted Asset Sales, depending
on the application of net sale proceeds, then
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the Borrowers may elect to treat such sale as
one or the other, and shall apply net sale
proceeds accordingly. Any such election, once
made, shall be irrevocable.
(vi) The Cash Budget would be reduced by the
amount of any expenses associated with assets
sold under clauses (i), (ii) or (iii), unless
the DIP Lender otherwise agreed in its
reasonable discretion.
Collateral and Priority: All obligations of the Borrowers and the
Guarantors to the DIP Lender, including, without
limitation, all principal and accrued interest, costs,
fees and expenses (collectively, the "DIP Obligations")
shall be:
(a) Secured (subject to the Carve-Out (as defined
herein)), by a first priority, fully perfected
security interest in and lien on all of the
existing and after acquired assets (tangible,
intangible, real, personal and mixed) of the
Borrowers and the Guarantors, including, without
limitation, all cash, cash equivalents, bank
accounts, accounts, other receivables, chattel
paper, contract rights, contracts, real estate,
leasehold interests, inventory, capital stock in
subsidiaries, investment property, instruments,
documents, securities (whether or not marketable
and specifically including the stock, limited
liability company and partnership interests of
each direct and indirect subsidiary of ABIZ),
equipment, vehicles, fixtures, franchise rights,
patents, tradenames, copyrights, intellectual
property, general intangibles (including any
avoidance actions under the Bankruptcy Code),
investment property, rights to payment including
tax refund claims, insurance proceeds, tort claims
and all substitutions, accessions, products and
proceeds of the foregoing, wherever located,
including insurance or other proceeds
(collectively, the "DIP Collateral"). However, the
DIP Collateral would not include the pledge of
ABIZ-PA's partnership interest in PHT and SABS, or
the pledge of any assets of those two
partnerships. The DIP Lender's lien in the DIP
Collateral would be subject only to the following:
(x) those valid, perfected and enforceable liens
of record as of the ABIZ petition date and only to
the extent set forth in Schedule 8.2 to the
Secured Debtor in Possession Credit and Security
Agreement dated as of March 27, 2002 (the
"Subordinate DIP Loan Agreement") among ABIZ, the
other borrowers and guarantors party thereto, the
lenders from time to time party thereto (the
"Subordinate DIP Lenders") and ACC as
Administrative Agent (the "Subordinate DIP Agent";
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collectively with the Subordinate DIP Lenders, the
"Subordinate DIP Creditors") (the "Permitted
Pre-Petition Liens"); and (y) certain liens (the
"Permitted Wachovia Liens") in favor of Wachovia
Bank on cash collateral in the amounts, and
securing the obligations, described below. The DIP
Lender shall have a second priority lien on and
security interest in the collateral subject to the
Permitted Pre-Petition Liens;
(b) Accorded administrative priority status under
section 364(c)(1) of the Bankruptcy Code, having a
superpriority over any and all administrative
expenses of the kind specified in sections 503(b)
or 507(b) of the Bankruptcy Code, including any
superpriority administrative claims granted the
Subordinate DIP Creditors, subject only to the
Carve-Out; and
(c) Joint and several among the Borrowers and the
Guarantors and senior in right of payment to any
obligations owed by the Borrowers or the
Guarantors to the Subordinate DIP Creditors under
the Subordinate DIP Loan Agreement.
All DIP Collateral shall be free and clear of any and
all liens, claims and encumbrances, except for: (1)
those in favor of the DIP Lender as specified herein;
(2) the Permitted Pre-Petition Liens; (3) the liens
granted in favor of the Subordinate DIP Creditors
pursuant to the Subordinate DIP Loan Agreement and the
April Interim DIP Order (as defined herein) (which
liens shall be subordinated, in form and substance
satisfactory to the DIP Lender, to the liens of the DIP
Lender); (4) the Permitted Wachovia Liens; and (5) the
Permitted Post-Petition Liens (as such term will be
defined in the DIP Loan Agreement) . In the event that
the trustee (the "Notes Trustee") for the holders of
the Senior Secured Notes (as defined herein) is granted
a lien on any of the DIP Collateral (other than the
continuing lien in the stock referenced on Schedule 8.2
of the Subordinate DIP Loan Agreement), it shall be a
condition that such lien (A) be granted as adequate
protection, as determined by the Bankruptcy Court, for
any diminution of the value of such stock since the
ABIZ petition date, (B) be limited to the underlying
assets of those entities whose stock had been pledged
to the Notes Trustee and (C) be subordinated, in form
and substance satisfactory to the DIP Lender in its
sole discretion, to the liens of the DIP Lender and the
Subordinate DIP Creditors. In all cases, subordination
shall require priority in the DIP Lender of its liens
and claims and standstill by the subordinated creditors
with respect to their liens and claims.
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The foregoing liens on the DIP Collateral and the
administrative priority claim shall be subject to a
carve-out (the "Carve-Out") for (i) following
termination of the Facility as provided for herein as
the result of a Default or an Event of Default (as each
such term will be defined in the DIP Loan Agreement),
the payment of allowed and unpaid professional fees and
disbursements incurred by the professionals retained,
pursuant to sections 327 or 1103(a) of the Bankruptcy
Code, by the Borrowers and the statutory committee of
unsecured creditors appointed in the Cases in an
aggregate amount not to exceed $1,500,000, and (ii)
unpaid quarterly fees required to be paid pursuant to
28 U.S.C. & 1930(a)(6) and any fees payable to the
Clerk of the Bankruptcy Court; provided, however, that
neither the Carve-Out nor the Cash Budget shall include
professional fees and disbursements incurred in
connection with asserting any claims, causes of action,
motions, adversary proceedings, objections, interests
or other litigation against the DIP Lender or the
Facility or challenging or raising any defense to the
DIP Obligations or any lien of the DIP Lender. As long
as no Default or Event of Default shall have occurred
and be continuing, the Borrowers shall be permitted to
pay budgeted compensation and reimbursement of
expenses, allowed and payable under sections 330 and
331 of the Bankruptcy Code, as the same may be payable,
and the amount so paid shall not reduce the Carve-Out.
Conditions Precedent to
Closing and Drawdown: The Borrowers and Guarantors shall have executed the
definitive postpetition financing agreement described
herein (the "DIP Loan Agreement"), and any and all
related promissory notes, collateral documents and
other instruments and agreements relating thereto. The
DIP Loan Agreement shall contain other conditions
precedent to the occurrence of the Closing Date and the
drawdown of the DIP Loan, including, without
limitation:
(a) The Subordinate DIP Creditors (i) shall have (x)
consented in writing to the superpriority
administrative claim, and priming lien, granted to
the DIP Lender, (y) consented in writing to the
Facility in accordance with Paragraph 14 of the
"Interim Order Pursuant to Section 364(c) of the
Bankruptcy Code (A) Authorizing Debtors to Obtain
Postpetition Financing (B) Providing Adequate
Protection to Certain Secured Creditors and (C)
Scheduling a Final Hearing on the Motion, Pursuant
to Bankruptcy Rule 4001," (the "April Interim DIP
Order") and (z) waived the requirement under
Paragraph 15 of the April Interim DIP Order to be
paid in full from the proceeds of the Facility,
(ii) shall have entered into an amendment to the
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Subordinate DIP Loan Agreement and an
intercreditor and subordination agreement with DIP
Lender on terms satisfactory to DIP Lender in its
sole discretion, pursuant to which, among other
things, (A) no further borrowings thereunder would
be permitted, (B) all Loans (as defined in the
Subordinate DIP Loan Agreement) outstanding under
the Subordinate DIP Facility in the approximate
amount of not less than $15,000,000 in principal
amount shall be and become a term loan (the
"Subordinate Term Loan") having a maturity no
earlier than the scheduled Maturity Date (or such
later date to which the Maturity Date is extended
with the consent of the DIP Lender), (C) covenant
compliance would be stayed in favor of compliance
with the DIP Loan Agreement, and (D) the exercise
by the Subordinate DIP Creditors of their rights
and remedies thereunder would be stayed pending
full repayment of all amounts owing under the
Facility, (iii) such Subordinate Term Loan shall
bear interest at the same rate as that provided in
the Subordinate DIP Loan Agreement, payable upon
maturity (and subject to the subordination).
Pursuant to said intercreditor and subordination
agreement, all liens granted as security for such
Subordinate Term Loan and the payment of all
principal, interest and fees owing in respect of
the Subordinate DIP Loan Agreement shall be
subordinate in priority of lien and right of
payment (together with any superpriority
administrative expense claims arising in favor of
the Subordinate DIP Lender pursuant to the April
Interim DIP Order or any final order relating to
the Subordinate DIP Facility as amended in
accordance with the Facility) to the prior payment
in full of all amounts at any time due and payable
pursuant to the Facility or pursuant to any Final
Order (as defined herein) relating to the
Facility. The intercreditor and subordination
agreement with the Subordinate DIP Creditors would
include appropriate protections for the DIP Lender
with respect to the collateral that is the subject
of the Permitted Wachovia Liens.
(b) Entry of an order of the Bankruptcy Court (the
"Final Order"), after notice given and a final
hearing conducted in accordance with Bankruptcy
Rule 4001(c), authorizing and approving the
transactions contemplated in the DIP Loan
Agreement, the amendment to the Subordinate DIP
Loan Agreement and the intercreditor and
subordination agreements contemplated by this
Proposal Outline, the modification of the April
Interim DIP Order required by the DIP Loan
Agreement, including the subordination of the
liens and superpriority administrative claims
granted to the Subordinate DIP Creditors
thereunder and finding, inter alia, that (i) the
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DIP Lender is extending credit to the Borrowers
and the Guarantors in good faith within the
meaning of section 364(e) of the Bankruptcy Code,
and (ii) the grant to the DIP Lender of liens
senior in right of priority to the liens granted
to the Subordinate DIP Creditors is permitted
under section 364(d)(1) of the Bankruptcy Code and
that the Subordinate DIP Creditors are adequately
protected in respect thereof. The Final Order
shall (i) approve the payment by the Borrowers and
Guarantors of, inter alia, the Closing Fee, the
Deposit (as defined in the Proposal Letter) and
the professional fees of the DIP Lender referred
to herein, (ii) provide for the automatic
perfection of the DIP Lender's first priority
liens on and security interests in the DIP
Collateral and the subordination of all liens and
claims of the Subordinate DIP Creditors to the
liens and claims of the DIP Lender, (iii) provide
for the automatic vacation of the automatic stay
upon the occurrence of a Default or an Event of
Default to permit enforcement of the DIP Lender's
remedies under the DIP Loan Agreement, including,
without limitation, the enforcement upon three (3)
business days prior written notice, of such
remedies against the DIP Collateral, (iv) prohibit
the granting of any liens, security interests or
superpriority administrative claims senior or
equal in priority of lien or right of payment to
the liens and claims of the DIP Lender and require
that the proceeds of any subsequent debtor in
possession financing be used to repay all amounts
outstanding owed to DIP Lender under the DIP Loan
Agreement, any other DIP Loan documentation or
otherwise, in full, (v) otherwise be in form and
substance satisfactory to the DIP Lender in its
sole discretion.
(c) The Final Order shall have become a final order
and shall be in full force and effect and shall
not have been stayed, reversed, vacated or
otherwise modified without the prior written
consent of the DIP Lender.
(d) Payment of all costs, fees (including, without
limitation, the Closing Fee, and the DIP Lender's
attorneys', financial advisors' and other
professionals' fees) and expenses owing to the DIP
Lender as referenced herein or in the DIP Loan
Agreement.
(e) Receipt by the DIP Lender of the Cash Budget, the
Business Plan and other financial information,
15
asset ownership and value information, and other
information that the DIP Lender may request, all
in form and substance satisfactory to the DIP
Lender in its sole discretion.
(f) The Borrowers and the Guarantors and, as
applicable, the Subordinate DIP Creditors and the
Notes Trustee shall have executed the DIP Loan
Agreement, an amendment to the Subordinate DIP
Loan Agreement, intercreditor and subordination
agreements and all other documentation with
respect thereto, in each case in form and
substance satisfactory to the DIP Lender in its
sole discretion.
(g) There shall have occurred no material adverse
change in (i) the business, condition (financial
or otherwise), operations, performance, properties
or prospects of the Borrowers and the Guarantors,
taken as a whole, since December 31, 2001 (other
than as described in the next sentence), (ii) the
ability of the Borrowers and the Guarantors to
perform their respective obligations under the
loan documentation or (iii) the ability of the DIP
Lender to enforce the loan documentation (any of
the foregoing being a "Material Adverse Change").
Exceptions to clause (i) above would be made for
(A) non-payment of interest on March 1, 2002 with
respect to the 12 1/4 % Senior Secured Notes of
ABIZ, due September 1, 2004 (the "Senior Secured
Notes"), (B) commencement of the Cases and the
events in connection therewith, (C) market
closures preceding the Closing Date (to the extent
disclosed on a schedule to the DIP Loan Agreement
and acceptable to the DIP Lender in its reasonable
discretion) and (D) the director and officer
changes referenced in subsections (r) and (s)
below.
(h) Governmental and third party consents and
approvals necessary in connection with the
Facility and the transactions contemplated thereby
shall have been obtained and shall remain in
effect (other than consents and approvals not
relating to material assets and otherwise not
material to the business of the Borrowers and
Guarantors); and no law or regulation shall be
applicable in the judgment of the DIP Lender that
restrains, prevents or imposes materially adverse
conditions upon the Facility or the transactions
contemplated thereby.
(i) If, on or prior to the Closing Date, ACC shall
have filed or had filed against it a petition
seeking an order for relief under Bankruptcy Code,
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ACC shall have obtained such approvals of any
bankruptcy court presiding over any such
bankruptcy case (relating to lien and claim
priorities and subordinations and other matters
pertaining to ACC, all as described in this
Proposal Outline) as the DIP Lender determines in
its sole discretion is appropriate.
(j) All objections of the Ad Hoc Committee of holders
of Senior Secured Notes and The Bank of New York,
as indenture trustee, the U.S. Trustee, the
Official Committee of Unsecured Creditors, or of
any other person, to the Final Order shall have
been withdrawn or resolved in a manner
satisfactory to the DIP Lender in its sole
discretion. If any subordinate liens or
superiority administrative claims are granted to
the Notes Trustee, the Notes Trustee and the
holders of the Senior Secured Notes shall have
entered into an intercreditor and subordination
agreement with the DIP Lender in form and
substance satisfactory to the DIP Lender and its
counsel in its sole discretion.
(k) The arrangements for the payroll system for ABIZ
and its subsidiaries shall be satisfactory to the
DIP Lender in its reasonable discretion, provided
that deposits and disbursements of funds for
payroll and related taxes (including all funds on
deposit as of the date of the Proposal Letter or
thereafter) shall be made to and from ABIZ (rather
than ACC) payroll accounts.
(l) ABIZ shall have provided the DIP Lender with
evidence reasonably acceptable to the DIP Lender
demonstrating that reasonably acceptable progress
has been made in connection with the modifications
to the ABIZ/ACC Management Services Agreement in
the manner specified by the DIP Lender in its
reasonable discretion.
(m) No Default or Event of Default shall exist under
any of the loan documents.
(n) All representations and warranties shall be true
and correct in all material respects as of the
Closing Date.
(o) Payment of all fees, costs, expenses and other
amounts then due and payable to the DIP Lender,
including, without limitation, internal fees,
costs and expenses and the fees and expenses of
the DIP Lender's counsel and financial and other
advisors.
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(p) The making of the DIP Loan shall not violate any
requirement of law and shall not be enjoined,
temporarily, preliminarily or permanently.
(q) Evidence shall have been furnished of the
liquidation and dissolution of Structus
Technologies, Inc., a South Carolina corporation.
(r) the resignations of John R. Rigas, James P. Rigas,
Michael J. Rigas and Timothy J. Rigas, and each
other member of their family, as directors and
officers of the Borrowers and the Guarantors,
shall have been completed and finally approved by
the Bankruptcy Court.
(s) the appointment of Robert Guth and Edward E.
Babcock, respectively, or other persons reasonably
acceptable to the DIP Lender, as the chief
executive officer and chief financial officer of
each Borrower and each Guarantors, and their
election or appointment as directors of each such
entity, shall have been completed and, to the
extent required by law, finally approved by the
Bankruptcy Court.
Representations
and Warranties: Those representations and warranties as are
customary or appropriate in the context of the proposed
DIP Loan Agreement and acceptable to the DIP Lender,
including, without limitation, with respect to: valid
existence, requisite power, due authorization, no
conflict with agreements or applicable law,
enforceability of loan documentation, absence of
Material Adverse Change, ownership of subsidiaries and
continued effectiveness of the Final Order.
Affirmative Covenants: The DIP Loan Agreement shall contain affirmative
covenants required by the DIP Lender, including,
without limitation: (i) delivery of weekly cash control
reports, monthly cash operations reports, monthly
operating reports and monthly Variance Reports, and
reports detailing collections on DIP Collateral,
including accounts receivable, and collections from the
sale or disposition of DIP Collateral, officers'
certificates, reporting packages and financial and
other information requested by the DIP Lender, (ii)
delivery monthly of a status report on asset sales
(including, in the case of Paydown Permitted Asset
Sales and Non-Paydown Permitted Asset Sales, details
thereof) and payment to the DIP Lender of the proceeds
thereof (except as to Non-Paydown Permitted Asset
18
Sales), (iii) payment of all postpetition taxes and
other obligations, (iv) notices of defaults, litigation
and other material events, (v) monthly accounts
receivable aging report for the preceding month (in
accordance with the Cash Budget and the Business Plan),
(vi) delivery of all pleadings, motions and other
documents filed on behalf of the Borrowers with the
Bankruptcy Court, and (vii) compliance in all material
respects with laws.
Negative Covenants: The DIP Loan Agreement shall contain negative
covenants required by the DIP Lender, including,
without limitation, with respect to (i) liens, (ii)
indebtedness, (iii) investments, (iv) affiliate
transactions, (v) free cash flow, (vi) payment of
prepetition claims other than in accordance with orders
of the Bankruptcy Court and in accordance with the Cash
Budget, (vii) the existence of any claims entitled to a
superpriority under section 364(c)(1) of the Bankruptcy
Code other than the superpriority claims of the DIP
Lender (and the Subordinate DIP Creditors) and (viii)
any adverse change in the Final Order.
Collateral Value: In addition to the blanket first priority lien
specified in this Proposal Outline to be granted tothe
DIP Lender, the Borrowers shall be obligated to
maintain DIP Collateral meeting such eligibility
criteria as the DIP Lender may establish from time to
time in its discretion and having an aggregate "quick
sale value" (as calculated by the DIP Lender in its
sole discretion) that, at all times from and after the
time of the entry of the Final Order until all DIP
Obligations have been paid in full, at least equals the
greater of: (i) $40,000,000 (subject to reduction as
part of paydowns of the DIP Loan); or (ii) an amount
equal to 200% of the DIP Obligations then outstanding
(whether or not then due or payable).
Accounts Receivable: Whether or not included from time to time in the
calculation of Collateral Value, the Borrowers shall
maintain, at all times, bona fide accounts receivable,
satisfying such eligibility criteria and in such
aggregate amounts as the DIP Lender may establish from
time to time in its sole discretion. In any case,
accounts receivable owing by ABIZ or ACC or the Rigas
family, or any of their respective affiliates, shall be
ineligible.
Wachovia L/Cs: Following the Closing Date, the Borrowers and the
Guarantors shall use reasonable commercial efforts to
arrange for the $20,000,000 letter of credit issued by
Wachovia Bank to the Commonwealth of Pennsylvania in
respect of the existing contract between said
Commonwealth and ABIZ-PA to be replaced by a letter of
credit in like face amount issued by the DIP Lender or
its designee. As part of such replacement, the
Permitted Wachovia Lien on the cash collateral securing
such letter of credit would terminate and such cash
collateral would be delivered to the issuer of the
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replacement letter of credit as collateral therefor.
The DIP Lender would be entitled to retain a second
priority lien on that cash collateral as further
security for the DIP Obligations. At the DIP Lender's
reasonable request, the Borrowers and the Guarantors
would likewise use their reasonable commercial efforts
to arrange for the replacement of any or all other
Wachovia letters of credit designated by the DIP Lender
with letters of credit issued by the DIP Lender or its
designee and transfer of the cash collateral therefor
under like arrangements.
Reasonable commercial efforts shall not require the
Borrowers or Guarantors to pay any non-nominal consent,
termination or similar fee as a condition to obtaining
any necessary consent or approval of Wachovia or any
letter of credit beneficiary to any such replacement,
but shall obligate them to pay any reasonable
incidental expenses (including reasonable attorneys'
fees and disbursements) of any such person, as well as
of the DIP Lender.
Events of Default: The DIP Loan Agreement shall contain Events of
Default required by the DIP Lender, including, without
limitation: (i) the entry of an order dismissing any of
the Cases or converting any of the cases to a chapter 7
case, (ii) the entry of an order appointing a chapter
11 trustee in any of the Cases, (iii) the entry of an
order granting any other claim superpriority status or
a lien or security interest equal or superior to that
granted to the DIP Lender in any of the Cases, (iv) the
entry of an order that in any respect stays, reverses,
vacates or otherwise modifies the DIP Loan Agreement,
any intercreditor and subordination agreement or the
Final Order without the prior written consent of the
DIP Lender, (v) the entry of an order in any of the
Cases appointing an examiner having enlarged powers
beyond those set forth under Section 1106(a)(3) and (4)
of the Bankruptcy Code, (vi) the failure of any of the
Borrowers to pay (a) interest or fees when due and such
default shall continue for two business days; or (b)
principal when due, (vii) the failure of any of the
Borrowers or Guarantors to comply with any negative
covenant, collateral covenant, collateral value
covenant or accounts receivable covenant or the
covenants pertaining to the Permitted Wachovia Liens,
(viii) the actual or substantive consolidation or
combination of any Borrower with any other person
(other than a Borrower), (ix) the ABIZ/ACC Management
20
Services Agreement shall be terminated or rejected,
unless within 60 days thereafter the services provided
thereunder by ACC shall have been replaced by
substantially equivalent services under arrangements
satisfactory to the DIP Lender in its reasonable
discretion, (x) the failure of any of the Borrowers or
Guarantors to perform or comply with any other term or
covenant and such default shall continue unremedied for
a period of 10 days, (xi) any representation or
warranty by any of the Borrowers or Guarantors shall be
incorrect or misleading in any material respect when
made, (xii) an unfavorable Free Cash Flow Variance, as
described below, shall occur, and (xiii) any other
event which constitutes an Event of Default under the
Subordinate DIP Loan Agreement. Cure periods (such as
the 60-day cure period in clause (ix) above) would not
stay the occurrence of Events of Default under other
subclauses even if arising out of or related to the
same circumstance or event that is the subject of such
cure.
An unfavorable "Free Cash Flow Variance" shall occur if
there is an unfavorable variance (as compared to the
Business Plan, assuming all elements of calculation are
contained therein) with respect to free cash flow of
the greater of $5,000,000 or 20%, in either case on a
cumulative basis following the Closing Date. (In the
DIP Loan Agreement, these dollar and percentage
variances may be adjusted, depending on the results of
the DIP Lender's continuing due diligence.) Free cash
flow would be defined in the DIP Loan Agreement and, in
general (and subject to further agreement of the
Borrowers and the DIP Lender), would be measured as
EBITDA minus cash capital expenditures, in each case
for the cumulative period then being measured.
Remedies: Upon the occurrence of an Event of Default, the DIP
Lender, upon three business days written notice to the
Borrowers, the Guarantors, the United States Trustee
and any statutory committee appointed in the Cases, may
terminate the Facility (the date of any such
termination, the "Termination Date", and any notice to
the Borrowers declaring such a termination, a
"Termination Notice"), declare the DIP Obligations in
respect of the DIP Loan Agreement to be immediately due
and payable, set off immediately any and all amounts in
any cash collateral account and exercise all rights and
remedies under the DIP Loan Agreement and other loan
documents and the Final Order. The DIP Lender shall
have other customary remedies under the DIP Loan
Agreement.
Financial and Other
Reporting Requirements: Each of the Borrowers and Guarantors shall provide all
information reasonably requested by the DIP Lender.
Indemnification: The Borrowers and the Guarantors shall indemnify and
hold harmless the DIP Lender and each of its affiliates
and each of the respective officers, directors,
21
employees, agents, advisors, attorneys and
representatives of each (each, an "Indemnified Party")
from and against any and all claims, damages, losses,
liabilities and expenses (including, without
limitation, reasonable fees and disbursements of
counsel), joint or several, that may be incurred by or
asserted or awarded against any Indemnified Party
(including, without limitation, in connection with or
relating any investigation, litigation or proceeding or
the preparation of any defense in connection
therewith), in each case arising out of or in
connection with or by reason of the Facility, the loan
documentation or any of the transactions contemplated
thereby, or any actual or proposed use of the proceeds
of the Facility, except to the extent such claim,
damage, loss, liability or expense is found in a final
non-appealable judgment by a court of competent
jurisdiction to have resulted primarily from such
Indemnified Party's gross negligence or willful
misconduct. In the case of an investigation, litigation
or other proceeding to which the indemnity in this
paragraph applies, such indemnity shall be effective
whether or not such investigation, litigation or
proceeding is brought by the Borrowers, the Guarantors,
any of their directors, securityholders or creditors,
an Indemnified Party or any other person, or an
Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are
consummated. The Borrowers and the Guarantors further
agree that no Indemnified Party shall have any
liability (whether direct or indirect, in contract,
tort or otherwise) to the Borrowers and the Guarantors
or any of their securityholders or creditors for or in
connection with the transactions contemplated hereby,
except for direct damages (as opposed to special,
indirect, consequential or punitive damages (including,
without limitation, any loss of profits, business or
anticipated savings)) determined in a final
non-appealable judgement by a court of competent
jurisdiction to have resulted primarily from such
Indemnified Party's gross negligence or willful
misconduct.
Fees and Expenses: The Borrowers and Guarantors shall jointly and
severally pay all (i) reasonable costs and expenses of
the DIP Lender (including all reasonable fees, expenses
and disbursements of outside counsel and financial and
other advisors) in connection with the negotiation,
preparation, execution, delivery and administration of
the DIP Loan Agreement and the other DIP loan documents
(including, without limitations, intercreditor and
subordination agreements) and (ii) costs and expenses
of the DIP Lender (including all reasonable fees,
expenses and disbursements of counsel and financial and
other advisors) in connection with any amendment
thereof and the enforcement or protection of any of
22
their rights and remedies under the DIP Loan Agreement
and the loan documentation. (The Proposal Letter
provides for the payment of the unpaid portion of the
$250,000 Initial Deposit (as defined therein) as part
of the acceptance of the Proposal Letter.)
Governing Law: New York, except as governed by the Bankruptcy Code.
This Proposal Outline is not intended to be all-inclusive and is subject to the
terms of the Proposal Letter, including, but not limited to, internal credit
approval of the Proposed Facility (as defined in such letter) as well as
compliance with the final terms and conditions upon which any such credit
approval may be obtained. There can be no assurance that such credit approval
will be recommended or obtained. If recommended and obtained, comprehensive
documentation of the transaction, in form and substance satisfactory to the DIP
Lender in its discretion, will have to be prepared.
23